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For example, they play a spell and I don't know what it is, so I say "hold on", take 7 seconds to read it, then decide to counter - or, do I have to skip the time to read it and decide whether to counter it without even knowing what the card does, sort of like a guess.

Any time you're unsure of something (rules, cards, procedures) call a judge. No one will look down on you for it, at least not anyone you need to worry about it. If they do look down on you for it, find a new place to play.
– corsiKaOct 11 '16 at 21:35

3 Answers
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You can't "pause" the game, as the game isn't progressing by itself. Instead, it progresses only when all players agree that the game should go on, which most of the time means to pass priority. The most relevant rule to this is:

500.2. A phase or step in which players receive priority ends when the stack is empty and all players pass in succession. Simply having the stack become empty doesn't cause such a phase or step to end; all players have to pass in succession with the stack empty. Because of this, each player gets a chance to add new things to the stack before that phase or step ends.

Each time a player acts in a way that uses the stack, such as cast a spell, there's a round of priority, as defined by the rules, which (as stated above) all players have to pass in succession in order to progress.

So not only do you get to take the time to read and understand the card, but you get to think about in what way, if at all, you want to respond. You may even ask a Judge or another player for clarifications on cards or rules. This is true at all times, for example if you're simply in need of clarification of the game state.
Nothing that isn't clearly labelled as such or banned in tournament play is luck- or random-based, requires manual dexterity, or requires fast reflexes or high reaction.

In a tournament scenario, the only requirement is to do this in a timely manner ("playing at a reasonable pace") to avoid Slow Play, which means you're not allowed to stall the game by thinking about what you want to do for more than a sensible period of time in order to not slow down the tournament as a whole, or take an unfair amount of the shared round time for yourself. What that timespan is depends on the game situation, but you will always be given enough time to read a card that's reasonably unknown to you, and understand what it does.
It isn't expected of you at any tournament level that you know all Magic cards out there, however it's expected at any level that you keep track of the game state and don't re-evaluate the entire board before making a decision.

The reason you might be thinking there's a certain time limit to take action is that the Duels of the Planeswalkers games include an automatically progressing bar that gives you only so much time to react. This is supposedly done to prevent idling players from stalling the game, but has nothing to do with the paper version of the game.

"It isn't expected of you at any tournament level that you know all Magic cards out there" I watch very high end Magic tournaments, and from time to time even they will read a card so they can get its exact ruling. I see professionals asking to see cards and even asking judges (which is funny because they themselves are often certified judges.)
– corsiKaOct 11 '16 at 21:39

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@corsiKa: Yeah, with about 30,000 different cards, that's understandable, and some cards' specific wording may be important for the specific situation, even though you basically know what the card does already. Other cases would be cards in non-native language that you want translated, or altered cards/promo cards with special artwork that you don't immediately recognize, or even Player Reward promos that don't even have text.
– TheThirdManOct 12 '16 at 6:10

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@corsiKa It makes sense though. Even if they themselves are a certified judge, they don't get the final say and don't really have a copy of the full rules on hand. So even if they have a confident interpretation, they want to be sure that their interpretation will be backed up by the people in charge before they commit to an action.
– ShufflepantsOct 12 '16 at 20:59

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You can mention as well that you can even ask a judge to look up the oracle text if there is erratta involved. This happens often in older formats or if you are playing in japan as a foreigner.
– Neil MeyerOct 13 '16 at 7:42

Although other answers have addressed your specific question, let me put it a different way that will serve you well in general: real time has (almost) no role in Magic. In other words, it basically never matters how long you take to perform any action in the game.1 Don't let anyone (except an acting judge) tell you otherwise.

A game of Magic is a sequence of steps - actions and decision points - which you and your opponent(s) have to go through in order.2 All you have to do is maintain the order. You don't have to stick to any time-based schedule.1

1Two exceptions: in a tournament, there is a time limit on the round as a whole (e.g. 50 minutes per match), but that does not affect the timing of individual actions within the game. Also, if you are taking an excessive amount of time between actions, that is slow play and is illegal, but it's a subjective criterion, for a judge to decide on. There's no specific number of seconds or anything like that.

2Actually, you don't have to stick to the exact order. The rules allow for out-of-order sequencing, which basically means you can do certain actions out of order as long as it doesn't confuse anybody.

Good point - I tried to avoid the "real time isn't important to MTG" argument because while not relevant to the rules, you're still playing games in the real world, where LGS's eventually close, and friends eventually have to go home. It's true that there's no time limit in Magic, yet "play at a reasonable pace" should always accompany that statement in my opinion.
– TheThirdManOct 11 '16 at 17:57

Also being subjective, the player skill level is a factor in slow play or not. If a new player takes a long time to understand a complicated board state or interaction, it's not considered slow play. A guy that often 3-0's his draft pod and prizes out at every pre-release probably doesn't need near as much time. In general, if you're an honest person you never need to worry about slow playing.
– corsiKaOct 11 '16 at 23:15

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@corsiKa: I disagree entirely! Slow Play is commited by a player taking too long for their actions, even though they meant well or "were honest", in order to allow the match to finish in time. If you're intentionally slowing down the game (likely to timeout the game), that's Stalling. Both are independant of the player's skill level - taking skill level into account when determining slow pair would be highly unfair, as both players share the 50min round time, and noone deserves more of that than the other!
– TheThirdManOct 12 '16 at 8:29

@TheThirdMan Slow Play is always unintentional (by definition.) What is reasonable for a player is different for every player. Most people who would commit slow play are going to get mopped up. I've been playing a lot of years and have never (once!) seen a slow play get called.
– corsiKaOct 12 '16 at 22:19

@corsiKa: It is unintentional, I never said otherwise. But it's still a method to keep the tournament as a whole on track, so even if you're unintentionally taking too long - you're taking too long. As for the inconsistancy of slow plays, you might be interested in this article by PV, and for a broader definition than the rules give you, there's this article on MTG Daily (that I in parts disagree with, such as the 30-seconds-example)
– TheThirdManOct 13 '16 at 6:15

You have the chance to read the card. When a spell is cast, it is put on the stack. Before it can resolve, both players have to pass priority. While you have priority, you can read the card and choose to cast a counter spell.

Now, if this is online, then you might have to take an action to say "Wait, I don't just want this to resolve immediately, I want to hold priority".

You pass priority by default for your own spells (whether online or not), but generally it's your opponent's spells you might want to counter. Magic Online doesn't pass priority there either, unless you've yielded for the whole turn or some such. Maybe you're thinking of Duels of the Planeswalkers where there's actually a countdown timer to pass priority, which you can pause?
– Cascabel♦Oct 11 '16 at 15:20

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The thing about passing priority by default is just a tournament rule.
– murgatroid99♦Oct 11 '16 at 16:25

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My point about that tournament rule default was that even there, you only automatically pass priority after your own things. You never automatically pass priority after your opponent does things.
– Cascabel♦Oct 12 '16 at 3:27